THE ONLINE CONCERT TICKET INDUSTRY

THE ONLINE CONCERT
TICKET INDUSTRY
JEANINE CHONG
PETER GALBO
AYLIN GUCALP
ALEXANDRA RHEINHARDT
AEM 4160- SPRING 2012
APRIL 24, 2012
AGENDA
•  Industry
•  Pricing Strategy
•  Advance Selling
•  Bundling
•  Price Discrimination
•  The Creative Element
•  Pricing Strategy Evasion: Scalping
•  Recommendation: Investment + Future Pricing
WHY CONCERTS?
Cost of an Experience
Creative Pricing Strategies
Major Source of Revenue for Music Industry
This is Why We go to Concerts
INDUSTRY
OVERVIEW
QUICK STATISTICS
PRICING TRENDS
CONSUMERS:
WHO PURCHASES?
Demand Factors:
• 
• 
• 
• 
Disposable Income
Consumer Sentiment
Leisure Time
Venue Location
GROWING CONSUMER BASE:
BABY BOOMERS
INDUSTRY
ORGANIZATION
INDUSTRY
STRUCTURE
-  Vertical Organization
-  Players: Performers, Agents, Promoters, Venues, Ticket
Agencies
-  1) Promoter contracts act via agent
-  2) Promoter searches for performance venue
-  3) Venue sets constraints on number and category of seats
-  4) Tickets are sold either at the venue booth or through
ticket agencies.
TECHNOLOGY & PRODUCTION
COSTS
In-House Software Development
Limited to initial start-up costs
Minimal maintenance costs
Technology
Seating Availability
Pricing Changes
COMPETITIVE
LANDSCAPE
COMPETITORS
HHI: IBISWORLD
LNE
33%
Other
43%
Flavorus
1%
Ebay
21%
Eventbrite
2%
HHI= 1573.35
MARKET SHARE:
PRIMARY TICKET SALES SHARES
Telecharge
2%
Etix
3%
Goldstar.com
4%
Other
13%
Ticketmaster
50%
Tickets.com
8%
LiveNation
8%
Eventbrite
12%
MARKET SHARE:
SECONDARY TICKET SALES SHARES
Other
22%
EventTicketsCenter
2%
GoTickets
2%
TicketCity
2%
SeatGeek
2%
TiqlQ
3%
Vividseats
4%
TicketNetwork
7%
Stubhub
35%
TicketLiquidator
11%
TicketsNow
10%
TICKETMASTER – LIVE NATION
MERGER
MAJOR PLAYERS
• Live Nation Entertainment
• StubHub (eBAY)
-Largest distributor of online
tickets
-Secondary seller
-Operates 5 business segments
-Increase in revenue of 21% from
2009 to 2010
-Groupon partnership
-Planned intro of dynamic pricing
-Individuals sell their tickets to others
at chosen price
-StubHub profits from seller and
buyer
-Revenue increase of 8.6% annually
-Growing demand for second-hand
tickets
PRODUCT DIFFERENTIATION
• Scope of Products Offered
• Price
• Convenience
• Customer Base
• Branding
GOVERNMENT’S ROLE
PRICING
STRATEGIES
BUNDLING
BUNDLING
-  Most common form of bundling is through multi-day,
multi-act, concert festivals.
-  Marginal cost of producing an additional performance is
small and total demand for the event is large compared to
the size of the premises
-  Equipment costs
-  Venue Cost
-  Security Cost
-  However, cost of separate performers is highly variable
BUNDLING (CONT.)
-  Both Pure Bundling and Mixed Bundling strategies are
used.
-  Pure bundling is more common, more profitable
-  Due to negative correlation of goods (services) provided at
these festivals
-  Mixed Bundling occurs most commonly through VIP
packaged deals, but also through single day festival
packages.
PURE VS. MIXED FESTIVALS
OPTIONS
9
8
8
Number of Festivals
7
6
5
5
4
3
2
1
0
Pure
Mixed
PURE BUNDLING
BONNAROO:
MUSIC & ARTS FESTIVAL
-  Only supplies one ticket package (at 5 different price
levels, using advance selling
-  4 day general admission pass:
- 
- 
- 
- 
- 
Summer pre sale (Level 1) $209.50
Holiday pre sale (Level 2) $224.50
Price Level 3 $234.50
Price Level 4 $244.50
Price Level 5 $259.50
MUSIC FESTIVAL PRICING:
PURE BUNDLE PRICE BY NUMBER OF DAY PASS
800
700
Price per ticket ($)
600
500
R² = 0.61985
400
300
200
100
0
0
1
2
3
4
Number of Days
5
6
7
BONNAROO (CONT.)
-  Un-related acts (services) attracting customers with
negatively correlated demand
-  Lineup:
-  Red Hot
Chili Peppers
-  Phish
-  Dispatch
-  Ludacris??
-  Draw on heterogeneity of tastes in order to increase
profitability
MIXED BUNDLING
ANALYSIS:
FESTIVAL ONE DAY PASS VS. FULL FESTIVAL PASS
Governor’s Ball (June 23rd & 24th)
-  Two day festival pass:
-  $160 pass + $15 service fee = $175 total
-  Single day Saturday or Sunday pass:
-  $95 pass + $10 service fee = $105 total
-  For both days: $210 total
-  Total Amount “Saved”: $35
VIP PACKAGES
-  VIP Parking
-  Concessions Packages
-  Offer convenience to those more willing to pay
-  Self-Selection (2nd degree)
“SCALING THE HOUSE”
Scaling the house refers to determining ticket categories and
prices:
(1)  What determines the optimal number of categories ?
(2)  How should the firm sort seats in categories ?
(3)  How should each seating category be priced ?
- Outdoor Festivals often cannot scale the house and must
achieve categories through creative bundling and advance selling
ADVANCE SELLING
ANALYSIS: STUBHUB
TICKETING TRACK
•  Primary sellers usually sell at one distinct price, so
advance selling is a technique used in secondary markets.
•  Advance selling happens through auction sites (ex: eBay,
Ticketmaster) or C2C sites (ex: StubHub)
OVERVIEW OF
ADVANCE SELLING
•  Ticket prices increase as purchase date nears the concert
date.
•  Buyer uncertainty decreases when the consumption period
nears.
• 
Therefore, less price sensitive and more willing to invest a
larger sum to achieve the desired consumption state.
OVERVIEW OF
ADVANCE SELLING
Price Changes to General Admission Tickets on StubHub
100
90
80
Price in US Dollars
70
60
fun.
Ingrid Michaelson
50
Avicii
The Avett Brothers
40
Passion Pit
30
20
10
0
5-Apr 6-Apr 7-Apr 8-Apr 9-Apr 10-Apr 11-Apr 12-Apr 13-Apr 14-Apr 15-Apr 16-Apr 17-Apr 18-Apr 19-Apr
FUN.
TICKET PRICE BY DAY
95
•  Concert held in Las Vegas (population: 567,641)
90
85
•  Date of Concert: April 21st.
•  Range of ticket prices: $65.50 to $90.00
Price in US Dollars
80
75
70
65
60
55
50
5-Apr
6-Apr
7-Apr
8-Apr
9-Apr
10-Apr
11-Apr
12-Apr
13-Apr
14-Apr
15-Apr
16-Apr
17-Apr
18-Apr
19-Apr
INGRID MICHAELSON
TICKET PRICE BY DAY
60
50
•  Concert held in Vancouver, BC (population: 603,502)
•  Date of Concert: April 19th.
•  Range of ticket prices: $4.00 to $47.95
Price in US Dollars
40
30
20
10
0
5-Apr
6-Apr
7-Apr
8-Apr
9-Apr
10-Apr
11-Apr
12-Apr
13-Apr
14-Apr
15-Apr
16-Apr
17-Apr
18-Apr
19-Apr
AVICII:
TICKET PRICE BY DAY
80
75
70
Price in US Dollars
65
60
55
50
45
•  Concert held in Boston (population: 617,594)
40
•  Date of Concert: April 22nd.
35
•  Range of ticket prices: $52.00 to $71.00
30
5-Apr
6-Apr
7-Apr
8-Apr
9-Apr
10-Apr
11-Apr
12-Apr
13-Apr
14-Apr
15-Apr
16-Apr
17-Apr
18-Apr
19-Apr
THE AVETT BROTHERS:
TICKET PRICE BY DAY
65
60
Price is US Dollars
55
50
45
•  Concert held in Albany (population: 97,856)
40
•  Date of Concert: April 22nd.
35
•  Range of ticket prices: $39.99 to $59.99
30
5-Apr
6-Apr
7-Apr
8-Apr
9-Apr
10-Apr
11-Apr
12-Apr
13-Apr
14-Apr
15-Apr
16-Apr
17-Apr
18-Apr
19-Apr
PASSION PIT:
TICKET PRICE BY DAY
66
64
Price in US Dollars
62
60
58
56
•  Concert held in Boston (population: 617,594)
54
•  Date of Concert: April 25th.
•  Range of ticket prices: $55.00 to $64.99
52
50
5-Apr
6-Apr
7-Apr
8-Apr
9-Apr
10-Apr
11-Apr
12-Apr
13-Apr
14-Apr
15-Apr
16-Apr
17-Apr
18-Apr
19-Apr
PRICE
DISCRIMINATION
FIRST DEGREE PRICE
DISCRIMINATION
•  Auction style purchasing
•  Prevalent in secondary markets
•  Presents the problem of multiple selling of a ticket
SECOND DEGREE PRICE
DISCRIMINATION
•  Scaling the House
(1)  What determines the optimal number of categories ?
(2)  How should the firm sort seats in categories ?
(3)  How should each seating category be priced ?
•  Problem: each seat is unique and can offer a unique experience:
heterogeneous good
•  Visibility
•  Sound
•  Seat vs. Stand
•  Quality of Seat
•  Promoters cannot set a different price for each seat!
SECOND DEGREE:
MENU OF TICKETS
USING LADY ANTEBELLUM CONCERT IN MOLINE, IL AT I WIRELESS CENTER
Type of Seat
Price
Fee
Total Price
Inner Circle Standing
General Admission
Standing
Reserved Main Floor
Seating
Lower Bowl Seating
67
10.5
77.5
47
10.05
57.05
47
47
10.05
10.05
57.05
57.05
Upper Bowl Seating
Reserved Main Floor
Seating
47
10.05
57.05
37
9.35
46.35
Lower Bowl Seating
37
9.35
46.35
Upper Bowl Seating
27
8.65
35.65
SECOND DEGREE:
DAY OF THE WEEK
Avicii Tour: Average Ticket Price by Day of Week
Ticket Price for General Admission Standing (Dollars)
90
80
70
60
50
40
30
20
10
0
Sunday
Tuesday
Wednesday
Thursday
Friday
Saturday
THIRD DEGREE
•  Median Income of Area
•  Population within a Certain Distance of Venue
THIRD DEGREE:
POPULATION + MEDIAN INCOME
CORRELATION COEFFICIENT: USING THE BRUCE SPRINGSTEEN TOUR
Variable One
Variable Two
Correlation Coefficient
Price
Population within 50 Miles
Price
Population
Price
Median Income
Pre-Price
Population within 50 Miles
Pre-Price
Population
Pre-Price
Median Income
0.191486872
Ticketmaster Fee
Population within 50 Miles
0.509463365
Ticketmaster Fee
Population
-0.27600638
Ticketmaster Fee
Median Income
0.597288274
0.549358999
-0.507644036
0.30968433
0.496629072
-0.514488143
THIRD DEGREE:
POPULATION + MEDIAN INCOME
CORRELATION COEFFICIENT: USING THE AVICII TOUR
Variable One
Variable Two
Correlation Coefficient
Price
Population within 50 Miles
Price
Population
Price
Median Income
0.110479454
Pre-Price
Population within 50 Miles
0.398797819
Pre-Price
Population
Pre-Price
Median Income
Ticketmaster Fee
Population within 50 Miles
0.064192236
Ticketmaster Fee
Population
-0.045913115
Ticketmaster Fee
Median Income
0.36301902
-0.077498639
-0.071416913
0.02977705
0.23455697
Bruce Springsteen Tour:
Price as a Function of Population within 50 Miles of the Venue
140
Ticket Price for General Admission Standing (Dollars)
120
100
80
60
40
20
0
0
2
4
6
8
10
12
14
16
18
20
Population within 50 miles of Venue (Millions of People)
Avicii Tour:
Price as a Function of Population within 50 miles of Venue
100
Ticket Price for General Admission Standing (Dollars)
90
80
70
60
50
40
30
20
10
0
0
1
2
3
4
5
6
7
Population within 50 miles of Venue (Millions of People)
25
Bruce Springsteen Tour:
Ticketmaster Fees as a Function of Median Income
Ticketmaster Fee for General Admission Standing (Dollars)
20
15
10
5
0
0
20
40
60
80
100
120
140
Median Income in Venue Zip Code (Thousands of Dollars)
THE CREATIVE
ELEMENT
THE CREATIVE ELEMENT:
DOES ARTIST AFFECT TICKET PRICE?
Average Ticket Price for General Admission Standing
Bruce Springsteen
Young the Giant
94 Avicii
29.81 Lady Antebellum
58.07 59.8 EVASION
BROKERS AND
SCALPERS
• Brokers
• Scalpers
- Unaffiliated Independent Agents
-Independent Sellers
- Purchase from Ticketing Agencies
-Purchase through Primary Sellers
- Sell to End Consumer
-Sell to End Consumer directly
before event
- Distribution through Nat’l Networks
- Higher Prices
-Prices Higher than Legally Allowed
PRICING STRATEGY EVASION:
SCALPING
•  Current Solutions
1. 
Rationing the quantity a single buyer can get
2. 
Requiring that buyers pay with a credit card and checking credit
cards numbers to control large purchases
3. 
Selling non-removable bracelets and admit only those bracelet
wearers at the consumption date
•  Resale laws restrict the price mark-up above face value
and the physical places where tickets can be exchanged.
•  Require that resellers purchase business licenses.
MORE THAN SCALPING:
RESALE AND MULTIPLE SALE OF
A SINGLE TICKET
•  Solution: You must show the credit card and present your
photo ID to gain to an event.
INVESTMENT
RECOMMENDATION
ANALYSIS + RECOMMENDATION:
REVENUE OUTLOOK
Grow at an average rate of 3.2% per year
ANALYSIS + RECOMMENDATION:
OUTLOOK
•  Revenue and prices will increase leading to greater profit
margins
Profit Margin2012= 7.8%
Profit Margin2017= 8.3%
•  These increasing profit margins will lead to an increase in
competition.
•  1.6% in ticket sellers = 287 ticket sellers a year
•  These companies may be integrated and bought by
larger brands such as eBay or Live Nation
ANALYSIS + RECOMMENDATION:
INVESTMENT STRATEGY
NATURAL
MONOPOLY:
NICHE MARKET
TICKET SELLER
(FLAVORUS,
GRUPO)
LIVE NATION
TICKETMASTER
VS. EBAY
(STUBHUB)
ANALYSIS + RECOMMENDATION:
THE FUTURE OF PRICING
•  Primary market sellers should study what prices their
tickets are reselling for in secondary markets
•  Find ways to regulate secondary market in order to
prevent multiple sales of a single ticket
Personalize…Customize…Socialize
QUESTIONS?
Thank you for your time!